Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 21: Price and welfare effects of a pharmaceutical substitution reform

David Granlund ()
Additional contact information
David Granlund: The Swedish Retail Institute (HUI), Postal: Regeringsgatan 60, SE-103 29 Stockholm, Sweden

Abstract: The price effects of the Swedish pharmaceutical substitution reform are analyzed using data for a panel of all pharmaceutical product sold in Sweden in 1997--2007. The price reduction due to the reform was estimated to average 10% and was found to be significantly larger for brand name pharmaceuticals than for generics. The results also imply that the reform amplified the effect of generic entry has on brand-name prices by a factor of ten. Results of a demand-estimation imply that the price reductions increased total pharmaceutical consumption by 8% and consumer welfare by SEK 2.7 billion annually.

Keywords: drugs; generic competition; equivalent variarion; demand estimation

JEL-codes: D40; I11; L65

29 pages, April 7, 2009

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